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After showing a notable move to the downside at the open, stocks remain mostly lower in mid-morning trading on Thursday. The markets have reacted negatively to some disappointing jobs data, although selling pressure has waned from earlier in the session.
While the Nasdaq has bounced off its lows and briefly turned positive, the Dow and theS&P 500 are firmly in the red. The Dow is down 78.18 points or 0.6 percent at 12,645.40 and the S&P 500 is down 7.14 points or 0.5 percent at 1,340.18, while theNasdaq is down 5.62 points or 0.2 percent at 2,822.61
The steep drop seen at the start of trading came following the release of a report from the Labor Department showing that initial jobless claims unexpectedly jumped to an eight-month high in the week ended April 30th.
The report showed that initial jobless claims rose by 43,000 to 474,000 from the previous week's revised figure of 431,000. The increase surprised economists, who had expected jobless claims to fall to 410,000 from the 429,000 originally reported for the previous week.
While Labor Department officials cited unusual factors that contributed to the unexpected increase in claims, the data has still added to recent concerns about the monthly jobs report due to be released on Friday. The closely watched report is expected to show the addition of 185,000 jobs in April.
Traders largely shrugged off the release of a separate Labor Department report showing a bigger than expected increase in labor productivity in the first quarter. The report also showed that labor costs rose by more than anticipated.
On the earnings front, auto giant General Motors (GM) is down by 2.5 percent despite reporting first quarter net income that surged up to $3.2 billion or $1.77 per share from $865 million or $0.55 per share in the year-ago quarter. The profit growth came as revenues increased by 15 percent to $36.2 billion.
Excluding items, GM reported earnings for the quarter of $0.95 per share compared to analyst estimates for earnings of $0.91 per share. The company also said that it expects its full year 2011 adjusted earnings to show "solid improvement" compared to 2010.
Meanwhile, shares of Cigna (CI) are up by 2.6 percent after the insurer reported first quarter adjusted earnings of $1.37 per share on revenues of $5.41 billion, while analysts expected earnings of $1.09 per share on $5.45 billion in revenue.
The company also forecast full year adjusted earnings of $4.65 to $5 per share compared to estimates for $4.73 per share.
Sector News
With the price of crude oil falling sharply on the day, considerable weakness is visible among oil producer stocks. The NYSE Arca Oil Index is currently down by 1.4 percent, pulling back further off last Friday's nearly three-year closing high.
The weakness in the sector comes as crude for June delivery has fallen $4.13 to $105.11 a barrel, extending the recent downward move since reaching a two and a half year high last Friday.
Gold stocks have also come under pressure on the day, moving lower along with the price of the precious metal. With gold for June delivery falling by $9.30 to $1,506 an ounce, the NYSE Arca Gold Bugs Index is currently down by 1.9 percent.
While weakness is also visible among financial and pharmaceutical stocks, the steep drop by the price of crude oil has contributed to significant strength in the oil-sensitive airline sector. After reaching a nearly two-month intraday high in earlier trading, the NYSE Arca Airline Index is currently up by 1.4 percent.
Trucking and networking stocks are also seeing notable strength on the day, with the Dow Jones Trucking Index and the NYSE Arca Networking Index advancing by 1.3 percent and 1 percent, respectively.
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European Market Reports |
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European Markets Fall As Lenders Slide
The European markets are in negative territory in afternoon trading Thursday, dragged down by lenders, ahead of the monetary policy decision from the European Central Bank. Sentiment was impacted by mixed earnings news and falling U.S. futures, as concerns about economic recovery discouraged risk-appetite.
The Euro Stoxx 50 index of euro zone blue chippers is losing 1.22 percent, while theStoxx Europe 50 index, which includes some major U.K. companies, is receding 0.88 percent.
The German DAX is declining 0.77 percent, and the French CAC 40 is slipping 1.17 percent. The UK's FTSE 100 is dropping 0.79 percent, while Switzerland's SMI is retreating 0.91 percent.
In Frankfurt, insurer Allianz is falling 3.7 percent, followed by BMW, which is down 1.5 percent. Cheuvreux reduced its rating on BMW to "Underperform" from "Outperform." Meanwhile, Credit Suisse raised its price target on the stock to 80 euros from 70 euros.
Other car manufacturers Daimler and Volkswagen are declining 1.3 percent and 0.7 percent, respectively. However, truckmaker MAN is rising 0.8 percent.
Commerzbank is losing 1.6 percent and Deutsche Bank is falling 0.3 percent.
EON is down 1.3 percent after the utility reaffirmed its full year earnings view.
Adidas is gaining 4.2 percent. The sports goods giant upped its sales outlook for the year as first-quarter profit increased from last year. Personal care products maker Beiersdorf, which reported a rise in first-quarter profit, is gaining 1.6 percent.
Insurer Munich Re and detergent maker Henkel are rising 1.2 percent and 1.1 percent, respectively. Goldman Sachs raised its price target on Henkel to 50.10 euros from 49.30 euros.
Lender Societe Generale is declining 4.1 percent in Paris after reporting a drop in first-quarter profit. Credit Agricole and Natixis are notably lower. BNP Paribas is losing 0.5 percent
Car manufacturers Renault and Peugeot are receding 2.7 percent and 2.1 percent, respectively.
Cement giant Lafarge, which reported a loss for the first quarter, is modestly higher.
In London, Lloyds Banking Group is plunging 9.1 percent. The lender reported a hefty loss for the first quarter. Royal Bank of Scotland is declining 4.4 percent and Barclaysis losing 2.1 percent.
Vedanta Resources is dropping 4.6 percent, despite reporting a surge in full year profit. Fresnillo, Kazakhmys, Xstrata, Anglo American, Rio Tinto and BHP Billitonare losing between 3.3 percent and 1.4 percent. However, Randgold Resources, which reported a surge in first-quarter profit, is up 0.6 percent.
In economic news, the U.K. service sector growth eased sharply in April following March's surge, data from Markit Economics showed. The Purchasing Managers' Index for the service sector fell to 54.3 from 57.1 in March. Economists had expected it to fall to 56 in April.
Meanwhile, the Bank of England left its key interest rate unchanged at a historic low of 0.5 percent again as expected and maintained the size of the quantitative easing at GBP 200 billion.
Across Asia/Pacific, markets had a mixed outing. Australia's All Ordinaries added 0.31 percent and China's Shanghai Composite Index gained 0.26 percent, while Hong Kong's Hang Seng retreated 0.24 percent.
In the U.S., futures point to a negative open on Wall Street. In the previous session, theDow fell 0.7 percent, the Nasdaq slipped 0.5 percent and the S&P 500 dropped 0.7 percent.
Crude for June delivery is sliding $2.25 to $106.99 per barrel and June gold is losing $12 to $1503.3 a troy ounce.
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Asia Market Reports |
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Asian Stocks Mixed On Weak US Economic Data
Asian stocks traded mixed on Thursday, with increasing interest rates and weakening commodity prices keeping sentiment subdued. Also, data showing lower-than-forecast growth in U.S. service industries and employment fanned worries that growth in the world's largest economy is faltering. Markets in Japan and South Korea were shut forpublic holidays.
The Australian market erased early losses to end modestly higher, as miners advanced and National Australia Bank shares rallied on posting forecast-beating first-half earnings. The benchmark S&P/ASX200 index and the broader All Ordinaries index closed up about 0.3 percent each.
NAB shares rose 2.3 percent after reporting a 16 percent rise in first-half net profit amid lower bad debts and a surge in business lending. News Corp tumbled 3.4 percent after its fiscal third-quarter profit fell 24 percent from a year earlier. Big miner Rio Tintoended up 0.3 percent while rival BHP rose 0.6 percent.
In economic news, retail sales in Australia declined in March by a seasonally adjusted 0.5 percent from February, the Australian Bureau of Statistics reported on Thursday. Sales totaled an adjusted A$20.46 billion for the period compared to A$20.55 billion in February.
New Zealand's NZX-50 index closed 0.2 percent higher, with Contact Energy leading the gainers after its 1-for-9 pro rata renounceable rights offer started trading. Shares of the electricity producer rose over 2 percent.
Shares of respiratory equipment maker Fisher & Paykel Healthcare gained 1.7 percent after the kiwi dollar showed signs of easing from its recent highs. HeavyweightTelecom ended up 0.9 percent. PGG Wrightson lost 2 percent after Agria Corp. said it has completed its $144 million partial acquisition of the rural services company.Fletcher Building, the country's biggest construction firm, shed a percent.
Statistics New Zealand said that the unemployment rate for the first quarter fell to 6.6 percent from the revised 6.7 percent recorded in the fourth quarter last year. Economists had forecast the rate to be 6.7 percent, down from the fourth quarter's original score of 6.8 percent.
China's Shanghai Composite was 0.32 percent higher while Hong Kong's Hang Sengeased 0.23 percent with a broad-based decline in commodity prices reducing risk appetite.
India's benchmark 30-share Sensex was trading up 0.2 percent erasing early losses, with a drop in crude prices for a fourth consecutive session and bargain hunting after eight days of losses offering some support.
Benchmark crude prices for June delivery were last trading down 33 cents below $109 a barrel, pressured by a rising stockpile and concerns over slowing U.S. economic growth. The euro, however, was higher against the dollar, with weak U.S. economic data and speculation that the ECB could hike rates offering some support.
Elsewhere, Indonesia's Jakarta Composite index was down 0.2 percent whileSingapore's Straits Times and Malaysia's KLSE Composite shed about 0.4 percent each.
U.S. stocks drifted lower overnight, as traders reacted negatively to a disappointing batch of U.S. economic data and caution prevailed ahead of Friday's closely-watched jobs report. The Dow fell 0.7 percent, the Nasdaq slipped half a percent and the S&P 500 dropped 0.7 percent.
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Forex Top Story |
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ECB Leaves Interest Rates On Hold, Trichet Eyed
The European Central Bank (ECB) left its key interest rates unchanged on Thursday in line with expectations, while the central bank chief is expected to signal the timing of another increase in the near term amid rising price pressures.
The Governing Council kept the main refi rate at 1.25 percent at the meeting held in Helsinki, Finland. In April, the central bank delivered its first rate hike in nearly three years amid spreading debt woes in the Eurozone periphery. The Frankfurt-based central bank lifted its key interest rate by 25 basis points from a record-low.
During the post-announcement press conference due to start at 8.30 am ET, ECB President Jean-Claude Trichet is expected to shed some clarity on the timing of the next move. Although the central bank never pre-commits, he is widely expected to use some code words to signal the next hike.
With a pledge to exercise "strong vigilance", the ECB may signal rate hike as early as next month, which could be seen as hasty by some, though recent economic fundamentals call for more tightening this year. Further, the quarter-point hike in April was not enough to prevent second-round effects.
Economists are not ruling out a move in June, but some expect the bank to hike the rates only in July. Yet, given the prospects of a slowdown in the single currency region's economy during the second half of the year and a deepening peripheral debt crisis, interest rates are unlikely to rise as far as markets are expecting.
If the ECB embarks on a more aggressive tightening, this will clearly only add to the peripheral euro-zone economies' problems and increase the chances of the likes of Spain being dragged deeper into the crisis, Capital Economics economist Ben May said.
Earlier this week, Portugal's caretaker government reached a deal with the European Union and the International Monetary Fund on a three-year bailout package worth 78 billion euros ($115 billion) for resolving the EU member-nation's financial problems. Elsewhere, speculation is rife regarding a possible restructuring of Greece's debt.
"The only credible indicator for the timing of a next ECB move is "(strong) vigilance", ING Senior Economist Carsten Brzeski said in a note this week. The economist cautioned against reading too much into such code words as they were developed only during the last tightening cycle. However, the central bank has never signaled rate hikes more than one month in advance in the past.
A commitment merely to monitor price developments very closely would suggest that a hike will come in July, Capital Economics said in an earlier note. "Whether or not the next hike comes in one month or two, the big issue is clearly just how far they will ultimately rise," economist Jonathan Loynes said.
Regarding non-standard measures of the ECB, Trichet is expected to continue stressing that the Securities Market Programme (SMP) is "ongoing", Loynes added. As no bond purchases were undertaken in the last five weeks, the economist said it is pretty clear that the central bank is increasingly reluctant to keep such measures in place at a time when it is tightening conventional policy. Most economic indicators released since the April meeting suggest that the 17-nation economy has maintained growth momentum, but inflationary pressures keep rising.
Inflation accelerated for a fifth consecutive month in April to 2.8 percent, the highest level since October 2008. The central bank targets inflation "below, but close to 2 percent". Meanwhile, economic sentiment deteriorated slightly but stayed above its long-term average. The unemployment rate in the currency bloc remained unchanged at 9.9 percent in March.
A key survey showed Wednesday that Eurozone private sector growth improved in April as expected boosted by manufacturing output, but official data revealed that retail sales decreased in March at the sharpest pace since November 2009, reflecting the impact of fiscal squeeze as well as rising inflation.
Canadian Market Reports |
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Early Signals Point To Lower Open For TSX
Bay Street stocks may struggle to move higher Thursday morning amid falling commodities and a mixed batch of economic data from both sides of the border. While Canada reported that building permits soared in March to highest level since 2007, data from the U.S. revealed first-time claims for unemployment benefits unexpectedly increased last week
U.S. stocks futures were pointing to a lower open.
On Wednesday, the S&P/TSX Composite Index extended losses for a third session, dipping 81.05 points or 0.59 percent to 13,611.32.
The price of crude oil moved down to a three-week low amid demand concerns after official data revealed pile up in U.S crude oil inventories. Crude for June shed $2.99 to $106.25 a barrel.
The price of gold continued to retreat from its record peak for a third session amid a flat dollar. Gold for June lost $5.20 to $1,510.10 an ounce.
In corporate news from Canada, gold miner Goldcorp Inc. reported improved first-quarter net earnings of $651 million or $0.81 per share compared to $247 million or $0.29 per share a year ago. Analysts were expecting the company to report earnings of $0.47 per share.
Gold mining properties developer Royal Gold swung to profit in third quarter, reporting net income of $19.6 million or $0.35 per share compared with a loss of $5.8 million or $0.13 per share last year. Analysts were expecting the company to report earnings of $0.39 per share.
Telecommunications industry service provider Uniphase Corp. reported that its third-quarter GAAP net income was $38.6 million or $0.16 per share, compared to a net loss of $11.9 million, or $0.05 per share for the third quarter of 2010. On a non-GAAP basis, net income was $51.0 million or $0.22 per share, up from $23.2 million or $0.10 per share for the third fiscal quarter of 2010. Analysts were expecting the company to report earnings of $0.20 per share.
Airlines company Air Canada reported a narrower first quarter loss of C$19 million or C$0.07 per share compared to C$112 million or C$0.41 per share last year. Loss per share, on an adjusted basis, was C$0.45 compared to a loss per share, on an adjusted basis, of C$0.85 in the prior-year quarter.
Commercial real estate company Brookfield Office Properties said its funds from operations for the first quarter was $141 million or $0.28 per share, compared with $124 million or $0.25 per share during the same period last year. Analysts were expecting the company to report earnings of $0.27 per share.
Automotive industry services provider Exco Technologies reported higher second-quarter net income of C$5.55 million or C$0.14 per share compared to C$2.23 million or C$0.05 per share last year.
Wireless solutions provider Sierra Wireless reported first-quarter net loss of $7.79 million or $0.25 per share compared to a loss of $7.52 million or $0.24 per share last year.
Oil fields industry services provider Pason Systems reported a much improved first-quarter earnings of C$17.8 million or C$0.22 per share, compared to C$7.9 million or C$0.10 per share last year.
In economic news, Statistics Canada said Municipalities issued building permits worth C$6.8 billion in March, up 17.20 percent from February. Economists expected 2.50 percent contraction from the previous month. Building permits soared in March to a level not seen since June 2007, boosted by intentions for residential and non-residential sectors in Ontario,
From south of the border, the U.S. Labor Department said that initial jobless claims rose by 43,000 to 474,000 from the previous week's revised figure of 431,000. The increase surprised economists, who had expected jobless claims to fall to 410,000 from the 429,000 originally reported for the previous week.
Elsewhere, the Bank of England today left its key interest rate unchanged at a historic low again as expected and maintained the size of the quantitative easing at GBP 200 billion and the European Central Bank left its key interest rates unchanged in line with expectations. |
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